PBOC lowers USD/CNY reference rate to 6.7152 from 6.7174 previously

The USD/CNY central rate for Friday’s upcoming trading session is set lower at 6.7152 by the People’s Bank of China (PBOC), against the previous day’s fixing of 6.7174 and the Reuters estimate of 6.6756.

PBOC: Key Questions Answered

What responsibilities does the People's Bank of China have?

Safeguarding price stability, including exchange rate stability, and supporting economic growth are the core monetary policy goals of the People's Bank of China (PBoC). The central bank also seeks to carry out financial reforms, including opening up and developing China’s financial market.

How is the PBoC owned and governed?

State ownership by the People's Republic of China (PRC) means the PBoC is not regarded as an autonomous institution. Rather than the governor, it is the Chinese Communist Party (CCP) Committee Secretary, nominated by the Chairman of the State Council, who exercises a key influence over the bank’s management and direction. At present, however, Mr Pan Gongsheng holds both positions.

Which key instruments does the PBoC use to steer monetary policy?

To meet its objectives, the PBoC draws on a wider range of monetary policy instruments than those used in Western economies. Its principal tools comprise the seven-day Reverse Repo Rate (RRR), the Medium-term Lending Facility (MLF), interventions in the foreign exchange market and the Reserve Requirement Ratio (RRR). China’s benchmark interest rate, however, is the Loan Prime Rate (LPR). Adjustments to the LPR directly affect market borrowing rates for loans and mortgages, as well as the interest earned on savings. Through LPR changes, the central bank can also influence the exchange rates of the Chinese Renminbi.

Can privately owned banks operate in China?

Private banking is permitted in China, where 19 private banks account for only a small share of the financial system. According to The Straits Times, the largest are digital lenders WeBank and MYbank, backed by technology giants Tencent and Ant Group. China opened its state-dominated financial sector in 2014 to domestic lenders funded entirely by private capital.

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